Natural Gas Price Fundamental Daily Forecast – Trader Reaction to $2.685 – $2.760 Sets Weekly Tone

Natural gas prices gapped higher early Monday and never looked back, confirming the potentially bullish reversal chart pattern on the daily chart as weekend weather forecasts emerged, calling for colder temperatures for the coming week and consequently greater demand.

At 19:47 GMT, January natural gas futures are trading $2.689, up $0.098 or +3.78%.

In addition to the colder trend in latest forecast, traders are still reacting to last week’s government report for the week-ending December 4 that came in larger-than-expected at 91 Bcf, creating a tighter supply/demand balance.

Cash prices also strengthened, with Natural Gas Intelligence’s Spot Gas National Average climbing 13.5 cents to $2.565.

Tudor, Pickering, Holt and Co (TPH) analysts said in addition to liquefied natural gas (LNG) running at record levels on the back of Corpus Christi Train 3 commissioning, production trended down as well, shedding 1.5 Bcf/d. This was primarily from associated basins, assisted by the Northeast and Haynesville Shale coming off recent highs as well, analysts said.

TPH analysts also said the next EIA report was shaping up “decently” as well despite little help from the weather man. Its early modeling pointed to a 125 BCF draw versus norms of 120 BCF.

Short-Term Weather Outlook

NatGasWeather said Friday’s afternoon run of the European dataset added back the nine heating degree days it had lost overnight. Furthermore, the 15-day outlook could be seen as cold enough for the coming week, though still rather bearish for the December 20-24 period.

“We think the back end of the forecast is susceptible to colder trends in time,” NatGasWeather said.

Short-Term Outlook

We said last week that we could live with a short-covering rally due to oversold conditions. We also said that the short-term range is $3.002 to $2.368, and that we could see a rally back to its retracement zone at $2.685 to $2.760.

Well, the market hit this zone on Monday, posting a high inside the zone at $2.708. It is now decision time for traders.

Since the main trend is down, sellers could come in at $2.685 to $2.760. They are going to try to form a potentially bearish secondary lower top.

Aggressive counter-trend buyers are going to try to drive the market through $2.760. If successful, this could create the momentum needed to challenge the main top at $3.002. Taking out this level will change the main trend to up.

If the rally stalls at $2.685 to $2.760 then look for a possible pullback into the minor 50% level at $2.538.